In this course, you will explore how to use accounting to allocate resources and incentivize manager and employee behaviors in using these resources. You will also learn how financial and non-financial accounting information facilitates strategic performance measurement and how to integrate this information to continuously improve strategy.
Upon successful completion of this course, you will be able to:
• Understand the role of managerial accounting information in common business decisions
• Differentiate relevant and irrelevant information
• Avoid common pitfalls in business decisions
• Prepare a master budget and its key components
• Describe the iterative and interrelated nature of budgeting
• Evaluate capital investments via a variety of measures
• Understand how upper management uses variance analysis
• Calculate, interpret, and investigate variances
• Understand decentralization and its advantages and disadvantages
• Compute and interpret financial performance measures
• Communicate the role of non-financial measures and strategic performance measurement systems
• Identify issues associated with performance measurement and incentives
• Understand the nature and role of subjective performance evaluation
This course is part of the iMBA offered by the University of Illinois, a flexible, fully-accredited online MBA at an incredibly competitive price. For more information, please see the Resource page in this course and onlinemba.illinois.edu.

Avaliações

SR

Great course, I does complement the Managerial Accounting course I took before. A lot of tools to apply in the work place. The videos and the examples are wonderful for the learning pourpose.

BB

Mar 01, 2019

Filled StarFilled StarFilled StarFilled StarFilled Star

Although seems to be easy going it is actually quote complex subject but professor made it simple for understanding - great work U of I !!

Na lição

Standard Costing and Variance Analysis

After establishing goals, setting targets, and the budget, upper management uses variance analysis to compare, assess, and investigate differences between actual and expected performance. In this module, you will learn how upper management uses variance analysis to motivate and monitor managers and employees, how to perform variance analysis on any aspect of the organization, and ultimately understand the power of this important tool for planning and control.

Ministrado por

Gary Hecht, Ph.D.

Transcrição

[ Music ] >> So now let's talk about interpreting these variances. Let's start with direct material spending variances and think about what would cause a direct material spending variance. Well, there are many different factors that can influence paying a different price for each unit of input then we thought we were going to. In other words our actual price is different than our standard price. Perhaps something occurred in the marketplace that increased the supply or decreased the supply of that raw material and that influenced the market price for that material. Something inside of our firm may have influenced what we've paid. Perhaps a purchasing manager took it upon himself or herself to buy a higher quality input. In this case they might have ended up paying more than they had expected then our standards suggested. In terms of direct material efficiency variances where would those come from? Again, a direct material efficiency variance occurs when we use a different amount of input per unit of output then we expected to and established as a standard. It could be that we had more scrap during this particular accounting period. We wasted more of our input, our raw material, then we had thought we were going to. And, therefore, on average we ended up using more input per unit of output that we produced. Maybe we became more efficient along the way. You can think about how direct materials price variances or spending variances and direct material efficiency variances are interrelated. Let's go back to that example of the purchasing manager buying a higher quality product. They would incur an unfavorable spending variance because we would have ended up paying an actual amount higher than what we set as the standard. But that higher quality product may have been able to be more efficient with the actual input. We had less waste or the quality of the products was better. So you can see how there might be a relationship between different variances calculated for direct materials. In this case the spending variance and efficiency variance. Let's think a little bit more about variances and move onto direct labor. In terms of direct labor spending variances what would cause that? Well, it might be that we unexpectedly gave some of our employees an increase in wages, a raise, or perhaps they worked more overtime for which we had to pay them a higher wage rate than we had expected and built into our standard. That might lead to a difference in what we pay our labor and what we expected to pay or created a standard about. [ Pause ] Direct labor efficiency variances. What would cause those? Well, again, it's the number of hours that an employee uses to produce so many units of output. That would be the input in this case. And so they might be more or less efficient than the standard assumed. In this case direct labor variances are interrelated, as well. In terms of direct labor spending variances we might have lost some of our higher paid workers, more experienced individuals, and replaced them with more introductory workers. That would lead to a favorable direct labor spending variance because our wages on average would be lower than we had expected and built into our standard. But, perhaps, introductory workers are less efficient. And in this case we would have an unfavorable efficiency variance. Perhaps because learning curves are higher and it takes introductory level workers more hours to create the same number of goods. So there is interrelationships within direct labor variances just like in direct material variances. And, of course, there are interrelationships between direct materials variances and direct labor. Again, let's go back to that purchasing manager who purchased a higher quality input. In this case we had an unfavorable direct material spending variance. We spent more per unit of input than we had planned, but that may have led to inefficiencies, both in terms of direct materials, where a higher quality input led to less waste, as well as if maybe it's perhaps easier to work with. Direct labor hours were perhaps less than we had planned because the quality of the input was greater. So interrelationships tell a nice story between variances. And it might be that as you investigate one variance in one area it leads you down a path to investigate other variances, as well. [ Pause ] So what have we learned in this first lesson in Module 3? Well we first talked about the definition of standard costs and their role within an organization's costing system. But we spend most of our time talking about the fundamental concepts underlying variance analysis. We developed a framework for calculating variable cost variances and will use that framework in the next lesson when we get into more in-depth calculations.